Strong ground motions were recorded at Port Island, Kobe, by a borehole array during the 1995 Hyogo-ken Nanbu (Kobe) earthquake. These records indicate that, while the horizontal peak accelerations were reduced as seismic waves traveling from the bottom to the surface, motions in the vertical direction were significantly amplified at the surface, with peak value of 1.5 to 2 times larger than the horizontal components. Some studies have discussed local site effects on the horizontal motions, whereas the available study on the vertical amplification is limited. In this article, we present a possible mechanism to explain the observed vertical amplification in detail. We consider that the observed large vertical amplification is mainly associated with incomplete saturation of near-surface soils, which causes substantial amplification of P waves but does not affect the propagation of S waves. Based on the concept of homogeneous pore fluid and Biot's theory of two-phase media, we discuss the characteristics of P-wave velocity, Poisson's ratio and degree of saturation in shallow soil layers, and show evidence of incomplete saturation of near-surface soils at the array site. We analyze a simple model to theoretically investigate the effects of saturation on vertical-motion amplification. The results show that the degree of saturation may produce substantial influence on the amplification, both amplitude and frequency content. Using a solid-fluid coupled finite element procedure, we perform a simulation of the observed vertical motions at the array site by including the effects of saturation. The results demonstrate the mechanism of large amplification caused by incomplete saturation of near-surface layers. The present study indicates that vertical-component motions may significantly be affected by pore-water saturation of soils, suggesting that we may need to carefully examine the condition of saturation in the study of vertical site amplification.